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NSW stamp duty loophole closed.

23/07/2013

In CTI Joint Venture Company Pty Ltd v Chief Commissioner of State Revenue, a call option allowed the optionee to nominate a substitute.  The Court preferred to treat the nomination as a novation, that is; the extinguishment of a grantee’s right to call for a transfer of the subject property and the creation of a similar right in the hands of a nominee.  That was held not to be a dutiable transfer for the purposes of the Duties Act 1997 (NSW).

The NSW State Government has moved quickly to protect its revenue. The State Revenue Legislation Amendment Bill 2013 will deem a dutiable transfer of an option to purchase land to take place in specified circumstances, namely; where the optionee

  • nominates another person to exercise the option; or
  • nominates another person as purchaser or transferee of the land the subject of the option either at the time of or before the exercise of the option; or
  • agrees to a novation of the option or otherwise gives up their rights under the option so that another person obtains the right to purchase the land.

On exercise of a call option, the exercise price will be taken to include any consideration provided by the nominee to acquire the option.  However, credit will be given for any duty paid for the nomination of the purchaser.

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